Futu Holdings Limited

statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. Forward-looking statements involving hearing risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those containing any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its annual report. With that, I will now turn the call over to Leif. Leif will make his comments in Chinese, and I will translate.

Thank you for participating in today's conference. At the end of the third quarter, the number of real estate customers reached 3.13 million, which increased by 43% and increased by 9%. The current competition for real estate customers is 25.4 million, which increased by 65% and increased by 25%. We see that the number of customers in each market has increased further.

Thank you all for joining our earnings call today. We concluded the third quarter with 3.13 million funded accounts, marking a 43% year-over-year and 9% quarter-over-quarter increase. During the quarter, we acquired 254,000 net new funded accounts, up 65% from a year ago and 25% sequentially. We're encouraged to see accelerated client acquisition in all markets.

The Hong Kong market has been competing with real estate customers since the first quarter of 2021, and has become the largest market for real estate customers in four consecutive quarters. This quarter, the stock market has shown strong performance and the stock market has been active. We have accepted the customer's trading enthusiasm through all of our sales strategy and transformed it into a bright customer performance. With the introduction of Finney's new framework,

In the third quarter, Hong Kong posted the highest quarterly net client ads since the first quarter of 2021 and remained the largest contributor to new funded accounts among all markets in the four straight quarters. We effectively sparked and captured clients' trading interests amid a quarter of strong equity market performance and busy IPO schedules. With a new IPO Finney framework, retail investors in Hong Kong increasingly consolidate their brokerage accounts to increase their chances of getting FBO allocation. And they tend to pick a trusted platform with the best overall user experience at their main brokerage accounts.

In Singapore, competitors with asset customers continue to grow steadily. Our number of active users in Japan is leading, and the advantage is that the industry continues to expand. We have further strengthened the market position as the number one retail brokerage in MUMU, Singapore. Since the exhibition in Malaysia, we have experienced a rapid expansion of seven seasons. We see that the future customer growth still exists in a wide space. As local investors' share of all types of assets continues to rise, the overall market potential is considerable. In terms of product localization, we have launched In Singapore, new funded accounts again post a steady sequential growth.

and we led our peers in DAUs by an even wider margin, further solidifying our position as the number one retail broker in Singapore. Following seven quarters of rapid expansion in Malaysia since launch, we still see huge runway for future client growth as equity ownership continues to go up. In the third quarter, we further strengthened product localization by launching Bursa Derivatives and SGX Futures, and upgraded AI tools to support Malay language and local stock analysis. Our annual flagship offline investor event, MooFest, was held in Singapore in July and in Malaysia in October, altogether attracting over 28,000 investors to sign up and further elevating our brand image in the region.

With the continuous improvement in brand influence and product experience, our U.S. business has continued to grow in quality this quarter. Thanks to our growing brand recognition and product experience, our U.S.

business delivered another quarter of high-quality growth. We achieved high double-digit sequential increase in new funded accounts We also observed another quarter of more active derivatives trading activity.

That's both the number of option traders and option contracts traded recorded double-digit sequential growth. S of quarter ends, total client assets reached 1.24 trillion Hong Kong dollars.

up 79% year-over-year and 27% quarter-of-a-quarter. The growth was driven by another quarter of robust net asset inflow, while the appreciation in client stock holdings also contributed meaningfully to the overall asset expansion this quarter. Average client assets locked double-digit sequential increases and hit new highs in every market. Bullish sentiment on Hong Kong and U.S. equities prompted more leveraged positions. The buoyant Hong Kong IPO market also boosted financing demand. As a result, margin financing and securities lending balance climbed 23% quarter-of-a-quarter to HK$63.1 billion.

With the support of the market environment and the investors' optimistic mood, the total amount of 3-季度總交易同比增長105%,完比增長9%,達到3.9萬億港元。 The exchange rate of Hong Kong stock and technology stocks has significantly increased, leading to a 43% rise in the exchange rate of Hong Kong stock to 1.19 trillion Hong Kong dollars, accounting for 31% of the total exchange rate of the group, which is the highest level since 2023. In terms of U.S. stocks, the stock price of many technology stocks and encrypted currency concept stocks reached a new high in the third quarter. The overall U.S. stock exchange rate of the platform

Total trading volume rose 105% year-over-year and 9% quarter-of-a-quarter to HK$3.9 trillion on the back of favorable market dynamics and upbeat investor sentiment. Elevated trading velocity and technology names lifted overall Hong Kong stock trading volume by 43% sequentially to HK$1.19 trillion, which accounted for 31% of total trading volume, the highest percentage since 2023. U.S. stock trading volume remained elevated at HK$2.6 trillion, as many technology and crypto names posted new highs.

In the third quarter, the exchange rate of encrypted currency assets rose by 90%. At the same time, the exchange rate of exchanges further increased, leading to a 161% increase in the total exchange rate of encrypted currencies. Among them, the Ethereum exchange rate is about four times that of the second quarter, to surpass Bitcoin and become the highest-paying currency in the platform. In Hong Kong, Soloma, launched by a retail investor, has a hot response. It has made a good contribution to the growth of the cryptocurrency exchange rate in this quarter. We believe that with the increasing choice of currencies, the continued strengthening of product capabilities, and the deepening of investor education, our customers' currency exchange penetration rate will still be greatly improved.

Crypto trading volume surged 161% sequentially, driven by a 90% quarter-over-quarter increase in crypto asset balance and accelerated trading velocity. Ethereum trading volume quadrupled during the quarter, overtaking Bitcoin as the most popular coin on our platform. In Hong Kong, the launch of Solana for retail investors was well-received. Solana contributed meaningfully to the growth of crypto turnover this quarter. We believe that as we continue to broaden coin selection, strengthen product capabilities, and deepen investor education, there is significant potential to further drive crypto trading penetration among our client base.

At the end of the year, the net net worth of financial management assets is 8%, reaching 1,756 billion Hong Kong dollars. In the third quarter, customers are more inclined to buy and receive products based on financial management assets. At the same time, the currency fund also continues to obtain capital inflows to better meet the customized needs of professional investors. We have launched a structural product self-pricing function. Customers can self-identify product parameters according to their own preferences, get a discount from more distributors, and carry out transactions at once. There is no need for artificial intervention throughout the process. Through this technological upgrade, we not only optimized the customer experience, but also improved the efficiency of business operation.

period-end wealth management assets rose 8% sequentially to HK$175.6 billion. During the quarter, clients increasingly allocated to fixed income funds, alongside the sustained inflow into money market funds. To better serve the bespoke needs of professional investors, we introduced a self-service request-for-quote function for structured products, whereby clients can customize products based on their desired parameters, access and compare quotes from a number of issuers, and execute trades seamlessly without human intervention. We leverage technology to remove friction in the client experience while driving operating efficiency.

At the end of this quarter, our service's IPO sales and IR sales reached 561, which is a 22% increase. In this quarter's hot Hong Kong stock IPO market, we will continue to play a key role in actively promoting investors to invest in new stocks. In the third quarter, more than 1,000 billion Hong Kong dollars were spent on the purchase of 12 new stocks on the Fudu platform. At the same time, we have worked with a number of well-known new stocks, including Tirei Motors, Hesai Technology, and Nansi Technology. It is worth mentioning that among the new stock issuance of different companies, we are the first to take on the role of the overall coordination person, marking our corporate service capability on a new level.

We ended the quarter with 561 IPO distribution in IR clients, up 22% year-over-year. We continue to play a leading role in facilitating retail participation in the heated Hong Kong IPO market. In the third quarter, 12 IPOs each attracted over $100 billion Hong Kong dollars in subscription amount on our platform. We served as joint book runners for multiple well-known listings, including those of Cherry Automobile, He Sai Group, and Lens Technology, Notably, in the Putong Group IPO, we assumed the role of overall coordinators for the first time, underscoring the advancement of our enterprise service capabilities. Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.

Thank you, Dave and Daniel. Please allow me to walk you through our financial performance in the third quarter. All the numbers are in Hong Kong dollars, unless otherwise noted. Total revenue was $6.4 billion, up 86% from $3.4 billion in the third quarter of 2024. Brokerage commission and handling charge income was $2.9 billion, up 91% year-over-year and 13% year-over-year, both primarily driven by higher trading volume. The change in blended commission rate was mostly technical in nature. The blended commission rate declined year-over-year as clients traded higher-priced U.S. options compared to a year-ago quarter. while the Q over Q increase in blended commission rate was due to sequentially stronger trading activities in low-price U.S. stocks and options. Interest income was $3 billion, up 79% year-over-year and 33% Q over Q. The year-over-year increase was driven by higher interest income from security borrowing and the lending business, margin financing, and bank deposits. The Q over Q increase was driven by higher interest income from security borrowing and the lending business, as well as higher margin financing interest income. Other income was $441 million, up 111% year-over-year, and a flat Q-by-Q. The year-over-year increase was primarily attributable to higher currency exchange service income, fund distribution service income, and IPO substitution service charge income. Our total cost was $780 million, an increase of 25% from $625 million in the third quarter of 2024. Brokerage commission and handling charge expenses were $161 million of 97% year-over-year and a flat Q-over-Q. Both the year-over-year and the Q-over-Q increase was roughly in line with the change of our brokerage commission and handling charge income. Interest expenses were $474 million of 17% year-over-year and 25% Q-over-Q. Both the year-over-year and the Q-over-Q increase was mainly due to higher interest expenses associated with our security borrowing and lending business. as well as high-margin financing interest expenses. Processing and servicing costs were $146 million, up 12% year-over-year and 10% Q-by-Q. The year-over-year increase was largely due to higher market information and data fee. The Q-by-Q increase was mainly driven by higher market information and data fee, as well as higher product service fee. As a result, our total gross profit was $5.6 billion, an increase of 100% from $2.8 billion in the third quarter of 2024. Growth margin was 87.8% as compared to 81.8% in the third quarter of 2024. Operating expenses was up 57% year-over-year and a 31% Q-over-Q to $1.7 billion. R&D expenses was $574 million, a 49% year-over-year and a 30% Q-over-Q. The year-over-year and the QVQ increase was mainly driven by our great investment in crypto and AI capabilities. Selling and the marketing expenses were $586 million of 86% year-over-year and the 36% QVQ. Both the year-over-year and the QVQ increase was mainly attributable to higher new fund accounts. GNN expenses was $535 million of 40% year-over-year and 26% QVQ. Both the year-over-year and the QVQ increase was primarily due to increase in general administrative headcount. As a result, income from operation increased 127% year-over-year and 17% QOQ to $3.9 billion. Operating margin increased to 61.3% from 50.4% in the third quarter of 2024, mostly due to strong top-line growth and operating leverage. Our net income increased by 143% year-over-year and a 25% Q-by-Q to $3.2 billion. Net income margin expanded to 50.1% in the third quarter as compared to 38.4% in the same quarter last year. Our effect tax rate for the quarter was 16.7%. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.

Thank you. If you wish to ask a question, you will need to press star one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star one, one again. We will take our first question and the question comes from the line of Cindy Wang from China Renaissance. Please go ahead, your line is open.

Okay, thank you, Mr. Guan, for giving me this opportunity to ask a question. And congratulations to the company for having a very bright performance in the third quarter. I have two questions to ask. The first one is that we see that the client's assets have a very bright performance in the third quarter. Can you tell us how much the contribution from Market to Market Gains and the deposit may be? And why is the current situation of the deposit and the trend of client assets in the fourth quarter? And then the second question, I would like to ask, because in the third quarter, we see that this CAC is also called the second quarter has risen, but it is still lower than the target of the beginning of the year. In the fourth quarter, the current market market is pulled back. How do we see the level of CAC in the fourth quarter and the status of a new customer recently? I will translate my question very quickly. Thanks for taking my call and congrats for the very great results in Q3. I have two questions here. First, client assets performed very strong in Q3. Could you break down by market market gains and net asset inflows? And what is the current run rate for net asset inflows and client assets in Q4? Second, customer acquisition cost in Q3 was higher than Q2, but still lower than your early four-year guidance. So given stock market pullback order today, what's the recent customer acquisition trend and what do you expect the customer acquisition cost in Q4? Thank you.

Okay, Cindy. Let me answer these two questions. One is about the three-week This is the division of asset changes. About 20% is a change from the market-to-market. The other 1% is from the contribution to the market-to-market ratio. In the 4th quarter, we see that Hong Kong and US stocks have a certain rebound. If we look at the market-to-market ratio, the contribution to the market-to-market ratio in the 4th quarter is negative. In the 4th quarter, The overall situation of the market is at a relatively normal level. The second question is related to the cost of goods. The average cost of goods in the third quarter is about HK$2,300. Compared to the second quarter, there is a small increase of HK$1,000. But as you said, at present, the cost of goods in the third quarter is still better than the cost of goods we thought in the beginning of the year, which is about 2,500 to 3,000 Hong Kong dollars. So from the current situation of goods in the fourth quarter, I feel that the entire position of goods, including the cost of goods, is in a relatively good state. So at present, the cost of goods in the whole year will be much better than what we estimated in the beginning of the year. For the first questions, regarding the asset movement, around one-third comes from the net client's asset inflow, and the remaining two-thirds come from the market-to-market fluctuations. And in the fourth quarter, quarter to days, actually the market-to-market implication was negative. But on the flip side, the net asset inflows we see the momentum remains very robust. There's no any slowdown compared with the second quarter or the third quarters. Then in the third quarter, regarding the client acquisition, the average cap in the third quarter is around $2,300, slightly up on a queue-on-queue basis. But on the absolute levels, it still remains our full years target the range of $2,500 to $3,000. And in the fourth quarter today, what I witnessed is that both the client acquisition momentum and also client acquisition cost remains quite healthy. So overall speaking, I feel more optimistic regarding our over years client acquisition cost versus our versus our objective in the beginning of this year.

Thank you. Thank you. We will take our next question.

Your next question comes from the line of Peter Zhang from JPMorgan. Please go ahead. Your line is open.

Thank you for the opportunity to ask me a question. I am Peter Zhang from Morgan. My first question is about interest income. We see that interest income has increased significantly in the last three seasons. We would like to ask what the driving factor behind this is. Could you please tell us about the contributions of the interest income in the last three seasons, such as the contribution of customer-limited funds, margin financing, and security borrowing? We would like to know if there has been a significant increase in security borrowing in the second and third quarter. What has FUTU done? Or is it mainly a market-driven factor? My second question is about crypto. We have seen a significant increase in virtual assets. We would like to know the current ratio of crypto currencies to our FUTU's income contribution in the first quarter. I'll translate it for you. Thanks for giving me the opportunity to ask questions. This is Peter Chang from J.T. Morgan. We have two questions. The first question is related to interest income. We saw the third quarter interest income record very strong sequential growth. We would like to understand what the driving forces behind the strong momentum and the commandments help us to break down the quarter interest income into the key items. That is the interest income from the current idle cash from margin financing business and from the security lending. And we also noticed that the security borrowing contribution to interest income have been very strong in second and third quarter. We wish to understand is this purely due to the market or is there something Food Tools has been doing at the content level to lead to the strong growth? Our second question is related to crypto business. We wish to understand what's the latest crypto business contribution to your revenue in the quarter and looking ahead, what will be the driving forces for crypto business to expand. For example, is this mostly due to the expansion of the token offering on your platform, or do many of us see other potential business like derivatives or staking business may have some upside to your crypto business? Thank you.

Okay, thank you, Peter. I will answer the first question. I will hand over the second question to my colleague, Daniel. In the third quarter, our entire interest income comes from three aspects. One is the interest income of the client's small capital. The other aspect is the interest income brought by the financing margin. The other part is the interest income of the brokerage. The distribution of these three parts is relatively average. It is about one-third of the total. Regarding the breakdown of the interest income in the third quarters, We have two different results arising from the interest income. Number one is from the client's idle cash. The other second is from the margin financing, and the third is the security borrow and the landings. Actually, in the third quarters, the percentage for these resources are quite even. Regarding the security borrowing and the lending business, we see a very strong momentum in the second quarter and the third quarter, but mainly the driving force was from the market itself. In particular, there will be more utilization for certain hard-to-borrow stocks in the third quarter. Thank you.

Hi, Peter. This is Daniel. I'll take your second question on our crypto business. First of all, I'm going to give you a breakdown of the exponential growth we saw in third quarter and then I'll discuss the outlook for this business. So the strong crypto growth was quite broad-based across the three markets that we currently offer crypto trading. In Hong Kong, for example, our clients Crypto AUM and Crypto Trading Volume both reported triple-digit sequential growth. And as we mentioned in our opening remarks, Solana was a very popular retail client, which is the new coin to launch in the third quarter. And in Singapore, we also saw triple-digit growth in crypto trading volume and a continuously growing penetration among our funded accounts. In the U.S., we launched a number of new functions, including market orders, and added 10 new coins, which really helped driving crypto AUM and volume. And so far, as we've seen in the third quarter, there's a lot of volatility in the crypto market. But we've seen that a lot of our clients really took advantage of those volatility. In October, for example, we've seen the crypto volume continue to grow high double digit month over month and hit a new high for a monthly volume and the continuous uptick in the crypto penetration. So these are all very encouraging signs. But still, crypto contributed a very small percentage to Futu's current revenues. But we think there is a long, long way for growth in terms of driving crypto penetration on our client base and driving crypto revenue. And in terms of some of the factors and catalysts that's going to help with that revenue growth, I agree with a lot of things you mentioned just now, like a broadening of token offerings will be quite helpful and will be a direct beneficiary of that. Of course, derivatives with higher take rate is going to help with monetization, but a lot of these developments will be contingent on regulatory approvals. But long-term, we're quite optimistic about the growth of this business, and we understand that a lot of these new businesses, they don't really grow in a linear fashion. Peter, I will first introduce some driving factors behind the rapid growth of the third quarter. Then I will look at some prospects for future income growth. In terms of the market, the growth of the crypto business in the third quarter of Hong Kong, Singapore and the United States is very rapid. The size and trading volume of assets in Hong Kong, China and the U.S. have achieved a three-digit increase. We also mentioned that Solana, a newly launched retail customer, has a very good reception of customers in the third quarter. The exchange rate of cryptocurrency in the third quarter of Singapore has also increased by half, and the exchange rate of customers is also continuously increasing. In the third quarter, the U.S. market has also added many new features, including the market price list, which has also increased ten new currencies. The asset size and transaction volume of the cryptocurrency has also increased significantly. In the fourth quarter, it looks like the whole cryptocurrency market is very fluctuating. But our customers are also very active in trading under this fluctuating market. In October, we saw that our platform has increased the amount of transactions The higher the market share, the higher the market share will grow. The higher the market share, the higher the market share will grow. Currently, the company's net profit is relatively low, but we are very confident in the long-term growth of the crypto business. Regarding the future growth of these core optimization and automation factors, as you said, if we can provide more coins, including if we can provide more high-quality products, these will definitely have a direct impact on our currencyization. But this also depends on some audits that may be supervised in various markets. So in the long run, we have a lot of confidence in this crypto business. And we think it will definitely improve for the new business. Thank you.

Thank you very much. I'd like to ask about the trend of interest income in the private sector. Can I follow up on the interest income part of the question? We wish to understand what's the fourth quarter trend on interest income. Particularly for your security borrowing business, do you see the momentum continue in force culture?

Thank you. Regarding your question about interest income trend, we do not have the high frequency data set for the interest income, in particular regarding the security borrowing business. But I'm very happy to give you an update during our fourth quarter results. Thank you.

Thank you. We will take our next question. Your next question comes from the line of Emazu from Bank of America Securities. Please go ahead. Your line is open. Thank you for the opportunity to ask me this question.

I also have two questions here. One is that I want to ask about interest income. Can we provide the latest sensitive analysis of the net interest rate decline? And then about the operating cost, we see that in the third quarter, the cost of R&D and G&A have increased significantly. So I have two questions. The first one is about the sensitivity analysis to the Fed rate cut. And the second one is about your R&D and G&A cost. They increase notably quarter over quarter and year over year. You mentioned earlier for the R&D expense, it's mainly related to crypto and AI capacity investment. And for GNA, it's for GNA staff increase. So could you tell us what's your target or your plan for investment in these areas?

Okay, thank you. Let me answer these two questions. One is related to interest income. For our static calculation, The negative impact of our monthly tax revenue at 25 points will be about 7 million Hong Kong dollars. Of course, this is a static calculation. From the perspective of actual operation, we can also see a lot of other positive factors. For example, the transaction volume of the customer, the size of the customer's income, will offset the negative impact of this static. This is related to interest income. The second question is related to the cost of development and management. On the one hand, as I mentioned in my opening remarks, we have continued to invest in digital currency assets. For example, in Hong Kong and other overseas places, we are preparing for photos and other system preparations. On the other hand, in terms of AI, we will continue to improve our AI agent to give customers and users an experience. In addition, we will also use the ability of AI to improve the efficiency of our internal business processes. Third, we will also have some management costs for some of our new international markets in the future to make some relevant early preparations. So some of the costs will have a certain consistency in this. Regarding the interest income sensitivities from the Fed, as we give the market some estimation for every 25 basis cut by the federal rate, our monthly pre-tax profit will be negatively impact by around the three, by seven million Hong Kong dollars. But having said that, the rate cut definitely will have a lot of positive factors, such as the trading velocity increase and also more clients, you know, asset inflows, which will partially offset, if not fully offset, this potential negative implications from the rate cut. Regarding the second question for the QOQ increase on the R&D and the GNN expenses. For the GNN expenses, we do have some front-loading costs in the preparation of certain new markets we may open in the next two years. And secondly, we have invested a lot on the crypto side, especially on the system in the preparation of certain license applications not only including Hong Kong, but also in other markets. And also, regarding the AIs, we will further optimize our AI capabilities, especially for the external part. There will be further optimization for our AI agent, for our clients. And internally, we will further utilize our AI capabilities to streamline our business process and enhance our operating efficiency.

Thank you. Thank you. We will take our next question. Your next question comes from the line of Yu Fan from CICC.

Please go ahead. Your line is open.

Hello. Thank you for giving me the opportunity to ask this question. Congratulations to the company for once again achieving such a brilliant performance in the third quarter. I am Fan You, an analyst in China. I also have two questions to ask. First, we see that the number of new users in this quarter is 250,000, which is still a very strong growth. Could you please help to disassemble the structure of each region in this? And if we look at it from the perspective of the number of users, what is the distribution of the region? This is my first question. The second question is about the US market. Thanks for taking my question. Congratulations on the outstanding results achieved this quarter. This is Yoyo Fan from CICC. I have two questions here. The first question, we see the strong customer growth in this culture. So what's the regional breakdown of the existing and also the net new paying client? And the second question is regarding the U.S. market. Would you please show more color on the market, our strategy, and what's our competitive advantages to the other peers in this market? Thank you.

Okay, thank you, Fan Yu. Let me answer the first question.

I will pass the second question to my colleague, Daniel. In the third quarter, the total number of products that have been added to the market is about the same as the total number of products that have been added to the market in Hong Kong and Malaysia. The total number of products that have been added to the market is about 50% of the total number of products that have been added to the market. In addition to some smaller markets that have just entered the market, such as Canada and New Zealand, The contribution ratio is between 5% and 15%. From the point of view of the amount of savings from the end of the third quarter, the customer ratio in the entire China region is about 46%. The customer ratio in the overseas market is 54%. So the number of customers in the entire China region is more than 50% of the entire group. For the breakdown of the new fund accounts in the third quarters, Hong Kong and Malaysia collectively contribute around 50% of total new fund accounts contribute in the third quarter, except a certain new markets or small markets we entered recently, such as Canada and New Zealand. The remaining markets' contributions is in the range of 5% to 15% for the third quarter. And at the end of the third quarters, the greater China clients contributed around a total of 46% of the group fund accounts. And the remaining overseas markets contributed 54% of total accounts.

Thank you. Hi, Yo-Yo. This is Daniel. I'll take your second question on our U.S. business. As you mentioned, we saw very strong momentum in terms of new funded accounts. and also in terms of engagement of our existing clients with a number of options traders and options contracts traded, both logging, double-digit, sequential growth. I think that really thanks to our increasing brand influence. And if you've been to New York recently, you'll see that we've launched another large-scale branding campaign in New York City, in the heart of New York City, and another brand important factor is obviously we have a very superior product experience for our clients. U.S. is probably the most competitive market in the world, but also unequivocally the largest brokerage market out there, which means that there is going to be diversified client needs to be satisfied by different players. We think that our product is built for the sophisticated active traders, and those are the clients we want to serve, and we'll continue to optimize our product experience for that client culture. As you just mentioned, in the third quarter, our U.S. market has had a very good growth, whether it's from the increase in oil and gas customers or from the increase in the number of customers. As we mentioned earlier, the double-digit growth of our U.S. total number of customers and total number of orders. We feel that this is mainly due to the influence of this brand that we are constantly improving in the United States. If you go to New York recently, you will see that we have made a big brand advertisement in New York. At the same time, what is more important is that we feel that we have a very leading product experience. The United States is indeed the most intense stock trading market in the world today, but the space of this market is also the largest in the world. This means that there will be a wide variety of customer needs in this market. Thank you.

We will take our next question. Your next question comes from the line of Charles Zhao from UBS. Please go ahead. Your line is open.

Good evening, everyone. I'm Zhou Cheng, an analyst at UBS Ruyin. Congratulations to the management for achieving a very good performance and exceeding the market expectations. I have two questions. The first one is about Tianxin Bank. Since the company entered the stock market in June last year, I would like to ask about the investments. In the short term, medium term, and long term, what is the strategic positioning of Tianxin Bank in the current business map? Can you share with us? The second question is about the net inflow of our client AOM. Is there a regional mix? For example, does HK still have more than 70% of AOM's net inflow? In addition, we also see that the share of high-quality customers is also in the process of rising. I understand that it should be USD 1 million or HKD 5 million. Let me translate it. So this is Charles Zhou from UBI. So first of all, congratulations to your very good results. It's also a strong beat to the market consensus. So I have two questions. So my first question is about the Air Star Bank. Could you please share what investment have you made since Futu acquired 44% equity stakes in Air Star Bank, I think last June? And also, how do you see the Air Star Bank's strategic role within Futu business in terms of short-term, medium-term, and also long-term perspective? My second question is regarding the regional mix of the client AUM net inflow. Can you maybe just give us a little bit more color about the breakdown of the regional mix? Say, for example, does Hong Kong Steel account for over 70%? And also, are we seeing a rising share from high net worth clients in the third quarter? Thank you.

Okay, thank you, Charles, for the two questions.

I'll answer your second question, and then my colleague Daniel will answer your question about the telecommunications industry. From the whole... uh uh uh and the increase in net assets in the Malaysian market is also very fast. Of course, at present, the whole of Hong Kong will contribute about two-thirds of the net assets of this quarter. From the perspective of the customer structure, I agree with your observation. We can see that the whole structure of our customers in Hong Kong has been improved and optimized. There are more rich and high-income customers. Regarding the breakdown of the net asset inflow by regions, actually we see the percentage contributed by Hong Kong got some slightly decrease on a Q and Q basis, mainly due to certain overseas markets such as Singapore, Malaysia also record a very strong inflows. So proportion wise, Hong Kong's percentage contribution was down a little bit. Regarding the client's cohort, we do see more and more high net worth client contributions in Hong Kong. And we do think this kind of trend will remain in the next coming quarters. And we think we have very meaningful potentials in terms of further upgrading our client's quality in Hong Kong through wealth management, et cetera.

Hi Charles, this is Daniel. I'll take your first question on Airstar Bank. First of all, to give you an update on our investment, during the third quarter, upon regulatory approval and the discussion between the shareholders, we have increased our stake in Airstar Bank to 68.4%, thereby becoming the controlling shareholder of Airstar Bank. So in the short term, we'll continue to focus on improving the customer experience, to enriching products and capabilities. And we believe that there is a lot of integration opportunities between the banking business and the brokerage business. And in the long term, we believe that a banking business can help you to increase client stickiness and to improve clients' wallet share and will enable clients to complete fund deposits, investments, lending, and consumption, we can satisfy all these various financial needs within Futu's ecosystem, and we can continue to enhance our clients' brand perception of Futu as a one-stop financial services platform. And so far, Futu is the only online brokerage platform in Hong Kong that has integrated digital banking capabilities, and we believe the scarcity of that license and the diversity of products and services we can offer under this license will continue to widen our competitive mode. And after this round of capital injection, Airstar Bank will be consolidated into Futu's financial statements. In the next two to three years, we'll still be in investment mode for Airstar Bank, but we believe that as Futu's client quality improves across various markets, And as more markets become profitable and play out that operating leverage, the drag of Airstar Bank's loss to Futu's overall P&L will be limited. And after the capital injection, Futu and Xiaomi Group will continue to work very closely and to take advantage of each other's resources in their respective ecosystems to operate this bank together. Charles, can you give us an update on our investment in Tianjin Bank? In the past three weeks, after the approval of the management and the negotiation of shareholders, we have further increased Tianjin Bank's holding ratio to 68.4%. So, Futu is now a shareholder of Tianjin. In the short term, we will focus on improving the user experience of Tianjin Bank and enriching the function of the product. We think that the banking and brokerage business can actually have a deep connection in many dimensions. In the long term, the expansion of banking business can help FUTU to further improve the annuality of customers, increase the amount of cash, and then allow customers to complete in the ecosystem of FUTU, including such as savings, investment, loan, consumption, etc. The needs of various financial scenarios will also deepen customers' awareness of FUTU as a one-stop financial service platform. Currently, FUTU is also the only comprehensive business platform in Hong Kong that combines digital banking capabilities. The bank's capacity, including the scarcity of cards and the expansion of multi-dimensional business, will further strengthen the competitive barrier of FUTU. After this increase, Tianjin Bank will also fully invest in FUTU's financial report. In the next two to three years, Tianjin Bank will still be in a stage of investment. Thank you. We will take our next question.

Your next question comes from the line of Chi-Yao Huang from Morgan Stanley. Please go ahead. Your line is open.

Hi, everyone. I'm Chi-Yao Huang from Morgan Stanley. I have two questions for you. First, I want to know if there are any pipelines in the future in terms of crypto and tokenization. And if you look at it in the long term, tokenization, which products we want to develop, and what additional value we want to provide to customers through tokenization. The second question is also related to crypto. Will we have some M&A plans or considerations? If we want to build crypto capabilities, we will consider investing, whether it is M&A or investment, in crypto capabilities. So I have two questions. One is about the product pipeline from crypto and tokenization in the next one or two quarters. And then maybe a bit longer term, what kind of value proposition do we try to achieve on tokenization to our clients? And second question is about whether management have any plan on M&A in the crypto space to accelerate the capability building and what kind of key capability of crypto are we looking to build in the near term? Thank you.

Thank you. I will answer the question about the two digital currencies. One is about the product line and the tokenization that you asked about. Because tokenization is a new topic. Of course, we have a lot of discussions on it, including the effects of many products. But currently, it depends on a lot of policies related to the management of different markets. So, there are many of our products that depend on this policy. So, it is difficult to give a very specific product route. Regarding some of the ideas about crypto, I think the company is open-minded in this regard. Overall, our business in crypto is very Regarding your two questions about the crypto, number one for the new product pipelines and also tokenization, we do have a lot of preparations and internal discussions, even some layout of certain products in that connection. But as you can understand, tokenization is a very new concept to the market nowadays and subject to different regulatory regimes, examinations. So it is very difficult for us to lay out a very clear roadmap for the product launch, given that a lot of factors will be regulatory dependent. And regarding the MA in the crypto side, definitely we are very open in these directions, given that crypto is a very strategically important consideration in our business direction down the road. So definitely we will keep these options open afterwards.

Thank you.

Thank you. We will take our next question.

Your next question comes from the line of Leon Chee from CLSA. Please go ahead, your line is open.

Hi, thanks for taking my questions. This is Leon Chee from CLSA. I have two questions today. Firstly, we are very glad to see that Hong Kong for the fourth consecutive quarter has led new client additions. I'm just interested in the client profile of our new customers being acquired in Hong Kong. for the past quarter and actually for the past four quarters in general given Hong Kong's equity market started to become quite active since around four quarters ago. Are there any meaningful differences in terms of these new customers in Hong Kong in terms of average AUM, ages, trading velocity, the products they are buying? if there are any notable differences for these new clients compared with our existing Hong Kong customers, most of which were acquired during probably the bull market a few years ago. So that's the first question on Hong Kong new customer profile. And second question, I'm interested in the gross margin trend in markets outside Hong Kong. We're very pleasantly surprised to see gross margin disclosing in the third quarter was very strong. Given we also have very good AUM growth in markets like Singapore and a lot of new clients in Malaysia, I presume the economy of scale is kicking in very rapidly. If possible, if management can share with us some gross margin trend in Singapore and Malaysia, Where are the margins in these markets standing in now? 我主要关心两方面问题 一方面是我们香港的客户结构 随着今年以来这个市场的变化 我们在香港新获得的客户 在他的这个客户客军资产 客户年龄方面 Is there any change? And in terms of trading velocity, is there any obvious difference between the customers we got in Hong Kong and the ones we got in the last round? The second question is about the major markets outside of Hong Kong, such as Singapore and Malaysia. How is their gross margin trend? Is it because of the rapid growth of AUM in these markets and the rapid growth of new customer numbers that their margin is rising? Is it possible to ask the management to share with us the position of these market margins? Thank you.

Hi, Leon. Thank you for these two questions. This is Daniel. I'll take these two questions. First of all, regarding our Hong Kong business, and in fact, in the third quarter, we have seen continued upward trajectory in average client assets of our new clients, and that coupled with the continuous net asset inflow, very robust net asset inflow from our existing clients, led to a double-digit sequential growth in average client assets in Hong Kong. And I think that is representative of what happened the past couple of quarters. As we continue to enhance our brand image, I think we can continue to attract more and more high-quality clients. And there'll be more clients that are inclined to do one-stop asset allocation within Futu's platform. And in terms of these clients' behavior, trading behavior specifically, I think that's very much market driven. As you know, in terms of our total trading volume in the past year or so, it's mostly kind of U.S. stocks. But in Q3 this year, as the Hong Kong equities market outperformed, a lot of our clients quickly flocked to Hong Kong equities and engaged quite actively. So I think this is very much driven by the performance and the relative outperformance of different equity markets. We think this is more cyclical than structural in terms of clients' trading behavior. And to your second question, yes, we think that online brokerage business inherently has huge operating leverage. But on the gross margin level, it's been very healthy across all of our markets because it mostly relates to trading or trading product and margin product all have very high margins. So the operating leverage mostly kicks in from the operating expenses. And as we continue to scale in a lot of these international markets, we have seen a very rapid expansion in operating leverage. And maybe to give you some numbers on our Singapore business, for a couple consecutive months, we have seen the operating margin in our Singapore business consistently topped 60%, and it's still expanding. I think that really speaks to the strong operating leverage in our business model. Let me translate the answers to these two questions. First, regarding the Hong Kong market, in the third quarter, we saw that the entry of new customers is continuously improving, and then we added the very strong entry of our old customers. In the end of the quarter, the assets of the customers achieved a double-digit increase. We think the performance of the third quarter is actually very representative, because in the past few quarters, with the continued increase in brand influence, we also saw that there were more high-quality and high-investment customers on the platform to join. That's right. But in the third quarter, in the case of Hong Kong stock off the form, we actually have a very large increase in the share price of Hong Kong stock. So in fact, after seeing that customers find that there is a profit and loss effect, they will still switch between different capital markets very quickly. So we think that the change in customer behavior may be more seasonal rather than structural. Regarding the second question about the profit margin of the overseas market, our business does have a very strong sense of profit margin. From a profit margin perspective, in fact, there are very good profit margin levels in different stages of the market. Because according to our pricing and business model, whether it is trading or interest-related products, the profit margin is quite good. Therefore, the increase in profit margin or the release of the sense of profit margin is mainly from the expense side. In terms of Singapore's market, we can also share a very good data. In the past few months, Singapore's operating margin has been above 60% and continues to expand. I think this fully proves that we have a very strong gene leverage in the business model. In the case that we can continue to increase revenue, the profit catch-up is relatively fast. Thank you.

Thank you, Daniel. Thanks a lot, Daniel. Very helpful.

Thank you. This concludes today's question and answer session. I'll now hand the call back to Daniel Yuan for closing remarks.

That concludes our call today. On behalf of the FUTU management team, I'd like to thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.